Affluent Americans are buying commercial real estate, but not spending as much on luxury items such as watches and accessories.
There are more wealthy Americans today than in years past, thanks to a rocket-launch of a stock market and recovering attitudes towards the economy five years from the recession of 2008.
But what does it mean to America and the world that there are more households with significant net worth? How will all of that wealth translate both economically and socially?
According to Spectrem’s Affluent Market Insights 2014, the number of U.S. households with a net worth of $1 million or more, not including primary residence (NIPR), reached a new high in 2013 of 9.63 million, an increase of more than 600,000 from 2012. After reaching the previous high of 9.2 million in 2007, the recession reduced the number of millionaires to 6.7 million in 2008 and the millionaire population has been growing ever since.
The Spectrem report also revealed that:
• Those households with $100,000 or more in net worth NIPR (Mass Affluent) climbed to a record high of 38.6 million from 37.4 million in 2012. The total had been at 31.2 million in post-recession 2008.
• Those households with $5 million or more in net worth NIPR (Ultra High Net Worth) also reached a record high of 1.24 million from 1.14 million in 2012. There were only 840,000 in 2008.
• Those households with $25 million or more in net worth NIPR grew by 15,000 to 132, 000 in 2013. In 2008, there were 84,000 with $25 million or more in net worth.
That is a lot of people with a lot of money. But are their numbers having an effect outside of breaking records for the number of people with a lot of money?
According to the Luxury Institute, wealthy consumers are spending less on items they don’t need and more on things that improve one’s outlook on life. In a report issued in late 2013, the Luxury Institute said a survey of investors with a net worth over $5 million showed that 33 percent plan to spend more than they have previously on travel and 20 percent are increasing their expenditures on eating out.
“Even among the wealthiest customers, luxury goods and services are considered less important in today’s economy,’’ Luxury institute CEO Milton Pedraza said in a statement. “People are less interested in watches and more interested in building lasting memories.”
According to Spectrem’s AMI report, Ultra High Net Worth investors are almost back to their 2005 levels in terms of equity investment plans. In 2005, the AMI report showed that 64 percent of UHNW investors planned to invest in equities in the next 12 months, while the 2014 report shows that 60 percent of UHNW investors are looking to equities.
There was a massive increase in commercial real estate investment in 2013, and capital markets experts predict the trend will continue and rise even more in 2014. There was $355 billion spent on commercial real estate in 2013, a 19 percent increase over what was spent in 2012.
The improvement in the economy which resulted in more affluent households is also having an effect on the corporate world. Business travel spending in the United States went up 3.8 percent from 2012, according to Global Business Travel Association, and the GBTA predicts spending in 2014 will jump another 6.6 percent. Because of improved economic conditions, the GBTA said total number of business trips will increase by 1.7 percent.
“Airports and hotels will be busy as American companies gain confidence and invest in travel to drive growth. And because business travel is a leading indicator of employment, this news is also another positive sign for the labor market,” Michael W. McCormick, GBTA executive director and chief operating officer, said in a statement.
Sixty percent of households with a net worth of $5 million or more intend to invest in equities in 2014, and 31 percent of households with a net worth between $100,000 and $1 million intend to do so. More than 50 percent of the $5 million-plus investors are willing to invest outside the United States, with an increased interest in investing in China.
Kent McDill is a staff writer for Millionaire Corner. McDill spent 30 years as a sports writer, working for United Press International and the Daily Herald of Arlington Heights, Ill. From 1988-1999, he covered the Chicago Bulls for the Daily Herald, traveling with them every day through the nine-month season. He also covered the Bulls for UPI from 1985-88, and currently covers the team for www.nba.com. He has written two books on the Bulls, including the new title “100 Things Bulls Fans Should Know And Do Before They Die’, published by Triumph Books. In August 2013, his new book “100 Things Bears Fans Should Know And Do Before They Die” gets published.
In 2008, he resigned from the Herald and became a freelance writer. The Herald hired him to write business features and speeches for the Daily Herald Business Conferences and Awards presentations.
McDill also writes a monthly parenting column for the Herald’s Suburban Parent magazine.
McDill is the father of four children, and an active fan of soccer, Jimmy Buffett and all things Disney.